Oil Retreats After Hitting Record High

Updated from 3:15 p.m. EDT

Oil futures tumbled on the New York Mercantile Exchange Monday in a highly volatile trading session that at one point saw West Texas crude set a new record high above $111 a barrel.

WTI crude for April delivery lately was down $4.51 at $105.70 a barrel. Earlier, the contract reached an all-time high of $111.80 a barrel. Brent crude fell $4.66 to $101.54 a barrel.

Reformulated gasoline shed 16 cents to finish at $2.53 a gallon, and heating oil declined 12 cents to $3.03 a gallon. Natural gas fell 48 cents to $9.39 per million British thermal units.

Prompting the fall in the crude was the emergency action taken by the Federal Reserve to ease lending restrictions for banks and to help finance the bailout and fire-sale of the once venerable Bear Stearns (BSC).

$200 Oil: Could It Be?

The collapse of Bear Stearns has stoked the feeling that the U.S. economy is either currently struggling with or is heading toward a recession. The apparent unquenchable thirst for oil in emerging markets like China and India had seemingly rendered energy commodities immune to the negative economic headlines that have slammed financial markets the past few months.

Crude futures on the Nymex have appreciated 11% year-to-date, whereas the S&P 500 is down 14% over the same period. Some analysts have argued that demand for oil would remain robust even in the case of a U.S. recession as long as emerging economies continued to see growth.

However, energy commodities were unable to dodge the bad news this time. Overseas markets lurched on the news that JPMorgan Chase(JPM) would pay $2 a share for Bear Stearns, which was trading for more than $60 a share last week.

"Today was a very important day for crude oil," said Dennis Gartman, publisher of the Gartman Letter, in an interview. "We saw a new record high and then a huge reversal. It appears that crude traders are realizing that it isn't just the domestic economy in danger. The global economy is in danger. I think that the crude market has finally seen a top."

Gartman said that a $15- to $25-a-barrel correction could now be in store for oil.

Elsewhere, energy stocks were getting thrashed. BP (BP) slid 4.6% to $61.31. Chevron (CVX) fell 3.3% to $82.57, and Hess (HES) dropped 4.9% to $94.29. Marathon (MRO) declined 7.7% to $46.76.

Meanwhile, Merrill Lynch upgraded a swath of oil-service stocks, including Halliburton (HAL) and Nabors Industries (NBR). Still, the stocks were unable to overcome the negative news in the energy commodities market. Halliburton fell 5% to $36.48, while Nabors lost 4.4% of its value to $30.75.

Know What You Own: BP operates in the oil industry, and some of the other stocks in its field include ConocoPhillips (COP) and Exxon Mobil (XOM). These stocks were recently trading at ($76.19, -1.68%) and ($86.40, +0.57%) respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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